AMA President Touts Health Insurance Reform

June 9, 2008
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GRAND RAPIDS — Health insurance would become each person’s responsibility under a plan advocated by American Medical Association President Ronald M. Davis during a visit to Grand Rapids last month.

Health insurance still could be offered through businesses, but premiums would be paid by employees, who would receive tax credits to help them foot the bill. And, like car insurance, health insurance would be a legal requirement.

Davis, of East Lansing, a physician in health promotion and disease prevention at the Henry Ford Health System in Detroit, presented the AMA’s vision to about 30 members of the Grand Rapids Area Chamber of Commerce’s Health Care & Human Resources Committee.

The focus of the AMA’s plan is to cover the 47 million uninsured Americans, Davis said, which he called “unacceptable and really disgraceful.”

Michigan has 1.2 million uninsured people, or 11 percent of the state’s population. “That’s better than the national figure of 15 percent, but still, 1.2 million uninsured in Michigan is nothing that we can be complacent about,” he said.

Average Health Benefit
Tax Expenditure, 2004

INCOME             TAX BENEFIT

Less than $10,000             $102

$40,000-$49,000            $1,448

$100,000 or more           $2,780

Average                          $1,482

Source: Lewin Group, as cited by the American Medical Association 

The AMA is in the middle of a three-year, multi-million dollar advertising campaign — “Voice for the Uninsured” — to keep the issue in front of voters during the presidential election campaign.

Committee Chairman Bob Hughes, of Advantage Benefits, said that committee members are concerned that the public might construe the AMA advertising campaign as support for a ballot proposal that would create a constitutional amendment to force the state Legislature to create universal health coverage. A group called Healthcare for Michigan, headed by a former legislator from the Detroit area, is circulating petitions to place the issue on the November ballot. It needs 375,000 signatures by July 7.

While the chamber’s committee champions universal health coverage, it opposes the ballot proposal because of its provision to alter the state constitution.

“We’re really concerned their (AMA’s) message right now could be seen as supportive of the constitutional mandate,” Hughes said.

“The biggest thing for small business owners is the way the tax code is set up to make insurance an individual purchase and not an employer-sponsored purchase,” Hughes added. “That might make it easier for businesses to deal with the health insurance issue.”

The AMA proposal relies on three pillars: health insurance tax credits or vouchers; choice of health plans; and protection for high-risk patients and more responsibility on individuals to maintain their own health.

The tax credits would be most generous for people with low incomes, and those who don’t pay taxes would receive vouchers. The cost could be covered by ending what Davis said amounts to more than $125 billion in income tax breaks each year: tax-free employer-paid health benefits.

“In an employer-based system, typically a worker would get $6,000 in health benefits and pay no taxes on them. Why? Because employer-provided health benefits are excluded from taxable income. As a result, the federal government is, in effect, subsidizing health insurance to the tune of about $125 billion per year,” Davis said. “That’s how much the government could collect.”

Tax credits could be as much as $5,000 for individuals and $10,000 for a family, he said.

Choice of health care plans is limited today, even for people who have employer-based insurance, Davis said.

“The reason why they have little choice under our system is that, under job-based coverage, almost 40 percent of companies offer no health benefits,” Davis said. “And of those that do, almost nine out of 10 offer only one health plan. So there’s no choice there.

“Under our proposal, people could buy the coverage they want and need. They could buy it through their employer, if their employer provides it, or they could chose not to and buy it on the individual market. They could keep or change their coverage at will, even if they change from one job to another.”

He said he thinks the insurance industry would respond with affordable products that meet people’s needs, just as they have with the Medicare Part D prescription drugs program.

The AMA also supports market reforms, such as statewide pools for high-risk patients, Davis said. The high-risk pool was a point of major contention in the recent debate over individual market reform in the Michigan Legislature. Unlike the package of bills backed by Blue Cross Blue Shield of Michigan, which called for an assessment on each health insurance company in the state, the AMA proposes a pool backed by a state’s general fund.

“We believe that distorts the insurance market, so our proposal is to fund state risk pools through general revenue,” Davis said. High risk individuals should be guaranteed insurance renewals at reasonable rates, he added.

The AMA backs association health plans, “whereby small employers can combine their work forces to have a larger aggregate work force to give them greater leverage to negotiate lower premiums for insurers,” he said.

“The key question is, how do you pay for these tax credits? We would propose to redirect that subsidy toward the funding of the tax credit. People who continue to get employer-based coverage would pay taxes on it,” Davis said. “To balance that, they would also get a tax credit, so they would be held harmless to a degree. They may be forced to pay a little bit out-of-pocket in order to get premium services, but that’s the sacrifice some of us will need to make in order to expand coverage universally.”

Another $30 billion to $60 billion would be needed to implement the plans, Davis said.

Those earning 500 percent or more of the Federal Poverty Level — about $50,000 for individuals and $100,000 for a family of four annually — would be required to buy health insurance immediately, followed by those of lesser means after tax credits are put into place. “Once people have the means to buy health insurance, they ought to own it. That’s the only way to spread the risk, if everybody’s buying into the system,” Davis said. “We need people to pay into the system when they are low-risk.”

The AMA is joined by 16 other national organizations in backing a similar platform as the Health Coverage Coalition for the Uninsured, which Davis said should serve as a model for Congress.

“If these diverse organizations from both ends of the political spectrum can find common ground to address these complex and contentious issues, then clearly Congress ought to be able to do the same,” Davis said.

By next year, the AMA advertising campaign that today is national will focus on Washington, D.C.

Davis, whose 12-month term as AMA president ends in mid-June, said he is hopeful that raising public awareness of health care issues will provide Congress and the new president the political will to take up a federal answer.

“In 2009, we’re going to have a new president and a new Congress, and our feeling is that there will no longer be any excuses for not addressing this problem in a permanent way,” he said.

The chamber’s committee last year issued its own set of health care reforms, which focused on state-level solutions.

“There’s got to be some kind of solution — whether you’re tackling the obesity part of it and making people accountable, whether you change the tax code or not. They’re talking about focusing the issue on a fed level, and we agree that has to happen,” Hughes said.

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